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Revisiting the palm oil boom: An examination of consumption in the oils complex

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  • Sanders, Daniel J.
  • Balagtas, Joseph Valdes
  • Gruere, Guillaume P.

Abstract

The production, trade, and market share of palm oil has shown impressive growth in the last two decades. As a result of sustainability concerns over issues such as deforestation in Indonesia, the causes of the growth in the palm oil market have received considerable attention. The growth of the biofuels market is one potential culprit that has been notably discussed, but it is not the only possible driver of growth in the palm oil market. Restrictions on genetically-modified organisms may have played a role, especially as they relate to limits on oil produced from GMO soybeans. Additionally, increasing concerns over health issues such as trans-fats may have spurred substitution to the low trans-fats palm oil. This analysis details some of the changes in net imports, market shares, and world prices that the edible oil complex has undergone. Additionally, a vector-error correction model and Granger causality are applied to the prices of the edible oils. The differences in causality across the oils in the complex suggest that the drivers of change may be more multi-dimensional than expected.

Suggested Citation

  • Sanders, Daniel J. & Balagtas, Joseph Valdes & Gruere, Guillaume P., 2011. "Revisiting the palm oil boom: An examination of consumption in the oils complex," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103726, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea11:103726
    DOI: 10.22004/ag.econ.103726
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    References listed on IDEAS

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    1. Yu, Tun-Hsiang (Edward) & Bessler, David A. & Fuller, Stephen W., 2006. "Cointegration and Causality Analysis of World Vegetable Oil and Crude Oil Prices," 2006 Annual meeting, July 23-26, Long Beach, CA 21439, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Zahari Zen & Colin Barlow & Ria Gondowarsito, 2005. "Oil Palm in Indonesian Socio-Economic Improvement A Review of Options," Departmental Working Papers 2005-11, The Australian National University, Arndt-Corden Department of Economics.
    3. Matthew T. Holt & Joseph V. Balagtas, 2009. "Estimating Structural Change with Smooth Transition Regressions: An Application to Meat Demand," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1424-1431.
    4. Kelvin Balcombe & George Rapsomanikis, 2008. "Bayesian Estimation and Selection of Nonlinear Vector Error Correction Models: The Case of the Sugar-Ethanol-Oil Nexus in Brazil," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(3), pages 658-668.
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